AUD/JPY climbs to near 100.30 amid expected intervention by Japanese authorities

• AUD/JPY extends its winning streak due to the persistent interest rate differential between Australia and Japan.
• There is uncertainty regarding the necessity for the RBA to implement rate cuts in 2024.
• BoJ’s Ueda shared his expectations of a gradual acceleration in the inflation trend.

The AUD/JPY pair continues its winning streak that began on April 4, climbing to near 100.30 during the European session on Tuesday. The Japanese Yen (JPY) remains subdued as the Bank of Japan (BoJ) adopts a cautious approach amidst an uncertain outlook for future rate hikes.

The AUD/JPY pair may receive upward support due to the persistent gap between Australian and Japanese interest rates. Investors are increasingly skeptical about the need for the Reserve Bank of Australia (RBA) to implement interest rate cuts in 2024, particularly following positive US data, which has raised expectations that the Federal Reserve (Fed) might maintain its higher interest rate stance for a longer period.

However, investors remain vigilant amid the possibility of Japanese authorities intervening in the market to prevent a destabilizing decline in the domestic currency. Bank of Japan (BoJ) Governor Kazuo Ueda continues to address inflation and policy outlook, with expectations of a gradual acceleration in the inflation trend. Therefore, it is crucial to monitor data and information to assess whether this scenario materializes.

Governor Ueda also emphasized that one of the factors to monitor is whether pay hikes offered in annual wage talks will materialize, as reflected in actual data. Another factor is whether service prices will increase, reflecting higher wages. If the inflation trend accelerates towards the 2% target, it may become possible to reduce the degree of monetary stimulus somewhat.

Meanwhile, the Australian Dollar (AUD) continues to advance against the Japanese Yen, despite the subdued Westpac Consumer Confidence data released on Tuesday. The AUD is bolstered by a stronger domestic equity market, with the ASX 200 Index poised for gains as investor attention remains focused on the Reserve Bank of Australia’s (RBA) interest rate decisions.